13) Which of the following factors would suggest a switch to activity-based costing?

A. Overhead costs constitute a significant portion of total costs

B. Production managers use data provided by the existing system.

C. Product lines similar in volume and manufacturing complexity

D. The manufacturing process has been stable

14) All of the following statements are correct EXCEPT that

A. the objective of installing ABC in service firms is different than it is in a manufacturing firm

B. the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company

C. activity-based costing has been widely adopted in service industries

D. a larger proportion of overhead costs are company-wide costs in service industries

15) What sometimes makes implementation of activity-based costing difficult in service industries is

A. identifying activities, activity cost plus, and cost drivers

B. attempting to reduce or eliminate nonvalue-added activities

C. the labeling of activities as value-added

D. that a larger proportion of overhead costs are company-wide costs

16) One of Astro Company's activity cost pools is machine setups, with estimated overhead of $150,000. Astro produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?

A. $60,000

B. $90,000

C. $150,000

D. $75,000

17) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the two products is:

Mini AMaxi B

Direct labor hours15,00025,000

Machine setups600400

Machine hours24,00026,000

Inspections800700

Overhead applied to Mini A using activity-based costing is

A. $1,536,000

B. $1,664,000

C. $1,920,000

D. $1,200,000

18) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the two products is:

Mini AMaxi B

Direct labor hours15,00025,000

Machine setups600400

Machine hours24,00026,000

Inspections800700

Overhead applied to Maxi B using activity-based costing is

A. $1,536,000

B. $1,664,000

C. $2,000,000

D. $1,280,000

19) Seran Company has contacted Truckel Inc. with an offer to sell it 5,000 of the wickets for $18 each. If Truckel makes the wickets, variable costs are $11 per unit. Fixed costs are $12 per unit; however, $5 per unit is avoidable. Should Truckel make or buy the wickets?

A. Buy; savings = $10,000

B. Make; savings = $20,000

C. Make; savings = $10,000

D. Buy; savings = $25,000

20) Rosen, Inc. has 10,000 obsolete calculators, which are carried in inventory at a cost of $20,000. If the calculators are scrapped, they can be sold for $1.10 each (for parts). If they are repackaged, at a cost of $15,000, they could be sold to toy stores for $2.50 per unit. What alternative should be chosen, and why?

A. Repackage; revenue is $5,000 greater than cost

B. Scrap; incremental loss is $9,000

C. Repackage; receive profit of $10,000

D. Scrap; profit is $1,000 greater

21) The cost to produce Part A was $10 per unit in 2005. During 2006, it has increased to $11 per unit. In 2006, Supplier Company has offered to supply Part A for $9 per unit. For the make-or-buy decision

A. incremental costs are $1 per unit

B. net relevant costs are $1 per unit

C. differential costs are $2 per unit

D. incremental revenues are $2 per unit

22) Hartley, Inc. has one product with a selling price per unit of $200, the unit variable cost is $75, and the total monthly fixed costs are $300,000. How much is Hartley’s contribution margin ratio?

A. 37.5%

B. 150%

C. 266.6%

D. 62.5%.

23. Which statement describes a fixed cost?

A. The amount per unit varies depending on the activity level

B. It varies in total at every level of activity

C. It remains the same per unit regardless of activity level

D. Its total varies proportionally to the level of activity

24) Disney’s variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $22,000. If sales are expected to increase $40,000, by how much will the company's net income increase?

A. $28,000

B. $18,000

C. $6,000

D. $12,000

25) Variable costing

A. is required under GAAP

B. is used for external reporting purposes

C. is also known as full costing

D. treats fixed manufacturing overhead as a period cost

26) Which cost is NOT charged to the product under variable costing?

A. Direct labor

B. Direct materials

C. Fixed manufacturing overhead

D. Variable manufacturing overhead

27) Orbach Company sells its product for $40 per unit. During 2005, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $10, direct labor $6, and variable overhead $2. Fixed costs are: $480,000 manufacturing overhead, and $60,000 selling and administrative expenses. The per unit manufacturing cost under absorption costing is

A. $18

B. $16

C. $27

D. $26

28) Which of the following is NOT considered an advantage of using standard costs?

A. Standard costs can be useful in setting prices for finished goods

B. Standard costs can reduce clerical costs

C. Standard costs can make employees "cost-conscious."

D. Standard costs can be used as a means of finding fault with performance

29) The difference between a budget and a standard is that

A. a budget expresses management's plans, while a standard reflects what actually happened

B. standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system

C. a budget expresses a total amount while a standard expresses a unit amount

D. a budget expresses what costs were, while a standard expresses what costs should be

30) If a company is concerned with the potential negative effects of establishing standards, they should

A. offer wage incentives to those meeting standards

B. set tight standards in order to motivate people

C. not employ any standards

D. set loose standards that are easy to fulfill

31) The per-unit standards for direct materials are 2 gallons at $4 per gallon. Last month, 11,200 gallons of direct materials that actually cost $42,400 were used to produce 6,000 units of product. The direct materials quantity variance for last month was

A. $2,400 favorable

B. $5,600 unfavorable

C. $3,200 unfavorable

D. $3,200 favorable

32) The standard number of hours that should have been worked for the output attained is 8,000 direct labor hours and the actual number of direct labor hours worked was 8,400. If the direct labor price variance was $8,400 unfavorable, and the standard rate of pay was $18 per direct labor hour, what was the actual rate of pay for direct labor?

A. $15 per direct labor hour

B. $18 per direct labor hour

C. $19 per direct labor hour

D. $17 per direct labor hour

33) The total variance is $10,000. The total materials variance is $4,000. The total labor variance is twice the total overhead variance. What is the total overhead variance?

A. $2,000

B. $4,000

C. $3,000

D. $1,000

34) Manufacturing overhead costs are applied to work in process on the basis of

A. standard hours allowed

B. actual overhead costs incurred

C. ratio of actual variable to fixed costs

D. actual hours worked

35) The overhead volume variance relates only to

A. variable overhead costs

B. both variable and fixed overhead costs

C. all manufacturing costs

D. fixed overhead costs

36) If the standard hours allowed are less than the standard hours at normal capacity

A. the overhead volume variance will be unfavorable

B. the overhead controllable variance will be favorable

C. variable overhead costs will be overapplied

D. variable overhead costs will be underapplied

37) Gottberg Mugs is planning to sell 2,000 mugs and produce 2,200 mugs during April. Each mug requires 2 pounds of resin and a half hour of direct labor. Resin costs $1 per pound and employees of the company are paid $12.50 per hour. Manufacturing overhead is applied at a rate of 120% of direct labor costs. Gottberg has 2,000 pounds of resin in beginning inventory and wants to have 2,400 pounds in ending inventory. How much is the total amount of budgeted direct labor for April?

A. $12,500

B. $25,000

C. $27,500

D. $13,750

38) Lewis Hats is planning to sell 600 straw hats. Each hat requires a half pound of straw and a quarter hour of direct labor. Straw costs $0.20 per pound and employees of the company are paid $22 per hour. Lewis has 80 pounds of straw and 40 hats in beginning inventory and wants to have 50 pounds of straw and 60 hats in ending inventory. How many units should Lewis Hats produce in April?

A. 600

B. 580

C. 630

D. 620

39) At January 1, 2004, Barry, Inc. has beginning inventory of 4,000 widgets. Barry estimates it will sell 35,000 units during the first quarter of 2004 with a 10% increase in sales each quarter. Barry’s policy is to maintain an ending inventory equal to 25% of the next quarter’s sales. Each widget costs $1 and is sold for $1.50. How much is budgeted sales revenue for the third quarter of 2004?

A. $57,525

B. $63,525

C. $42,350

D. $63,000

40) In most cases, prices are set by the

A. customers

B. largest competitor

C. selling company

D. competitive market

41) A company must price its product to cover its costs and earn a reasonable profit in

A. all cases

B. its early years

C. the long run

D. the short run

42) The cost-plus pricing approach's major advantage is

A. it considers customer demand

B. that sales volume has no effect on per unit costs

C. it is simple to compute

D. it can be used to determine a product’s target cost

43) What does cost accounting measure, record, and report

A. Future costs

B. Product costs

C. Managerial accounting decisions

D. Manufacturing processes

44) Why is factory overhead applied to products and jobs by manufacturing companies?

A. Because indirect costs are easy to trace to products and jobs

B. It provides a more accurate cost of the job or products being processed

C. Total actual overhead costs can never be accurately determined for production

D. It allows managers more timely determination of product costs during the manufacturing process

45) In a job order cost accounting system, the Work in Process account is

50) Each of the following is a limitation of activity-based costing EXCEPT

A. It is more complex than traditional costing

B. More cost pools are used

C. It can be expensive to use

D. Some arbitrary allocations continue

51) Ace Company sells office chairs with a selling price of $25 and a contribution margin per unit of $15. It takes 3 machine hours to produce one chair. How much is the contribution margin per unit of limited resource?

A. $3.33

B. $45

C. $10

D. $5

52) Walton, Inc. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $16, while the cost of assembling each unit is estimated at $17. Unassembled units can be sold for $55, while assembled units could be sold for $71 per unit. What decision should Walton make?

A. Sell before assembly; the company will save $15 per unit

B. Process further; the company will save $1 per unit

C. Process further; the company will save $16 per unit

D. Sell before assembly; the company will save $1 per unit

53) Which cost is charged to the product under variable costing?

A. Fixed manufacturing overhead

B. Variable manufacturing overhead

C. Fixed administrative expenses

D. Variable administrative expenses

54) Which of the following statements is FALSE?

A. A standard is a unit amount

B. A standard cost is more accurate than a budgeted cost

C. The standard cost of a product is equivalent to the budgeted cost per unit of product

D. In concept, standards and budgets are essentially the same

55) If standard costs are incorporated into the accounting system

A. it can eliminate the need for the budgeting process

B. it may simplify the costing of inventories and reduce clerical costs

C. approval of the stockholders is required

D. the accounting system will produce information which is less relevant than the historical cost accounting system

56) A standard cost is

A. the average cost in an industry

B. a cost which is paid for a group of similar products

C. the historical cost of producing a product last year

D. a predetermined cost

57) The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in producing 2,400 units, the actual direct labor cost was $51,200 for 4,000 direct labor hours worked, the total direct labor variance is

A. $6,400 favorable

B. $6,400 unfavorable

C. $1,920 unfavorable

D. $4,000 unfavorable

58) If the standard hours allowed are less than the standard hours at normal capacity, the volume variance

A. will be favorable

B. will be greater than the controllable variance

C. cannot be calculated

D. will be unfavorable

59) Which of the following statements is FALSE?

A. The costs that cause the overhead volume variance are usually controllable costs

B. The overhead volume variance is favorable if standard hours allowed for output is greater than the standard hours at normal capacity

C. The overhead volume variance indicates whether plant facilities were used efficiently during the period

D. The overhead volume variance relates solely to fixed costs

60) Looker Hats is planning to sell 600 felt hats, and 700 will be produced during June. Each hat requires a half yard of felt and a quarter hour of direct labor. Felt costs $3.00 per yard and employees of the company are paid $20 per hour. How much is the total amount of budgeted direct labor for June?

A. $48,000

B. $3,500

C. $3,000

D. $2,400

61) In cost-plus pricing, the markup percentage is computed by dividing the desired ROI per unit by the

A. total cost per unit

B. total manufacturing cost per unit

C. fixed cost per unit

D. variable cost per unit

62) Which would be an appropriate cost driver for the ordering and receiving activity cost pool?

A. Purchase orders

B. Inspections

C. Machine setups

D. Machine hours

63) The first step in activity-based costing is to

A. identify the cost driver that has a strong correlation to the activity cost pool

D. identify and classify the major activities involved in the manufacture of specific products

64) Which one of the following is required in order for an activity base to be useful in cost behavior analysis?

A. The activity should always be based on the number of units produced

B. There should be a correlation between changes in the level of activity and changes in costs.

C. The activity should always be a fixed amount

D. The activity level should be an approved GAAP activity base

65) Which cost is NOT charged to the product under absorption costing?

A. Fixed administrative expenses

B. Variable manufacturing overhead

C. Direct labor

D. Direct materials

66) A company developed the following per-unit standards for its product: 2 pounds of direct materials at $6 per pound. Last month, 2,000 pounds of direct materials were purchased for $11,400. The direct materials price variance for last month was

A. $600 unfavorable

B. $11,400 favorable

C. $300 favorable

D. $600 favorable

67) The standard rate of pay is $5 per direct labor hour. If the actual direct labor payroll was $19,600 for 4,000 direct labor hours worked, the direct labor price (rate) variance is

A. $500 favorable

B. $400 unfavorable

C. $500 unfavorable

D. $400 favorable

68) Waco’s Widgets plans to sell 22,000 widgets during May, 19,000 units in June, and 20,000 during July. Waco keeps 10% of the next month’s sales as ending inventory. How many units should Waco produce during June?

70) Which one of the following is an important feature of a job order cost system?

A. Each must be completed before a new product order is accepted

B. Each job uses similar processes to produce

C. Each consists of features which distinguish it from the next

D. Each job has characteristics similar to the next

71) Which of the following represents the two basic types of cost accounting systems?

A. Job order and process cost systems

B. Job order and batch systems

C. Job order and job accumulation systems

D. Process cost and batch systems

72) Which one of the following is indirect labor considered?

A. Product cost

B. Period cost

C. Nonmanufacturing cost

D. Raw material cost

73) Which of the following is an element of manufacturing overhead?

A. Factory workers wages

B. Plant manager’s salary

C. Components used in calculators during production

D. Flour used in manufactured cake mixes

74) Which of the following is NOT typical of traditional costing systems?

A. Use of a single predetermined overhead rate

B. Assumption of correlation between direct labor and incurrence of overhead cost

C. Use of direct labor hours or direct labor cost to assign overhead

D. Use of multiple cost drivers to allocate overhead

75) Max Company uses 10,000 units of Part A in producing its products. A supplier offers to make Part A for $7. Max Company has relevant costs of $8 a unit to manufacture Part A. If there is excess capacity, the opportunity cost of buying Part A from the supplier is

A. $80,000

B. $70,000

C. $0

D. $10,000

76) H55 Company sells two products, beer and wine. Beer has a 10 percent profit margin and wine has a 12 percent profit margin. Beer has a 27 percent contribution margin and wine has a 25 percent contribution margin. If other factors are equal, which product should H55 push to customers?

A. It should sell an equal quantity of both

B. Selling either results in the same additional income for the COMPANY

C. Beer

D. Wine

77) During December, the capital budget indicates a $280,000 purchase of equipment. The ending November cash balance is budgeted to be $40,000. Cash receipts are $840,000, and cash disbursements are $610,000 during December. The company wants to maintain a minimum cash balance of $20,000. What is the minimum cash loan that must be planned to be borrowed from the bank during December?

A. $0

B. $50,000

C. $10,000

D. $30,000

78) Prices are set by the competitive market when

A. a product is not easily distinguished from competing products

B. a company can effectively differentiate its product from others

C. there are no other producers capable of manufacturing a similar item

D. the product is specially made for a customer

79) The standards and rules that are recognized as a general guide for financial reporting are called __________.

A. standards of financial reporting

B. generally accepted accounting principles

C. generally accepted accounting standards

D. operating guidelines

80) Hess, Inc. sells a single product with a contribution margin of $12 per unit and fixed costs of $74,400 and sales for the current year of $100,000. How much is Hess’s break even point?

A. 2,133 units

B. 6,200 units

C. $25,600

D. 4,600 units

81) In what situations will a static budget be most effective in evaluating a manager's effectiveness?

A. The company has no fixed costs.

B. The planned activity levels match actual activity levels.

C. The company has substantial variable costs.

D. The company has substantial fixed costs.

82) The primary purpose of the statement of cash flows is to __________.

A. facilitate banking relationships

B. provide information about the cash receipts and cash payments during a period

C. prove that revenues exceed expenses if there is a net income

D. provide information about the investing and financing activities during a period

83) The category that is generally considered to be the best measure of a company's ability to

continue as a going concern is

A. cash flows from operating activities.

B. cash flows from investing activities.

C. cash flows from financing activities.

D. usually different from year to year.

84) Of the items below, the one that appears first on the statement of cash flows is

A. noncash investing and financing activities.

B. net increase (decrease) in cash.

C. cash at the end of the period.

D. cash at the beginning of the period.

85) Which of the following transactions does not affect cash during a period?

A. Write-off of an uncollectible account

B. Collection of an accounts receivable

C. Sale of treasury stock

D. Exercise of the call option on bonds payable

86) One of Lara Dole Company's activity cost pools is machine setups, with estimated overhead of $300,000. Dole produces flares (400 setups) and health packs (600 setups). How much of the machine setup cost pool should be assigned to flares?

A. $0.

B. $120,000.

C. $150,000.

D. $180,000

87) As compared to a high-volume product, a low-volume product

A. usually requires less special handling.

B. is usually responsible for more overhead costs per unit.

C. requires relatively fewer machine setups.

D. requires use of direct labor hours as the primary cost driver to ensure proper allocation